[Hpn] CCC Policy Alert #192 on the Homeless Peoples Network 6-5-00

I CAN! icanamerica@email.msn.com
Mon, 05 Jun 2000 16:09:11 -0500

June 5, 2000                Policy Alert # 192                   Center for
Community Change

Proposed "CRA Sunshine" Regulations:  Highlights and Issues
Proposed Defense Amendment would cut Nuclear Arsenal and Budget


BACKGROUND:  On May 19, 2000, the Federal banking regulators formally asked
for public comment on proposed regulations to implement the so-called "CRA
Sunshine" provisions contained in Sec. 711 of last year's Gramm-Leach-Bliley
financial services "modernization" legislation.  (See the May 19 Federal
Register:  65 FR 31961.)  The regulations, which follow the statutory
language very closely, call for disclosure of Community Reinvestment Act
(CRA) agreements and annual reporting by parties to such agreements, and
establish penalties for non-compliance.

Groups that followed the debate over the "financial modernization" bill last
year will remember that this provision was the very last piece of the bill
to be drafted, and that its final language was negotiated late at night in a
closed-door session by members of the House-Senate conference committee that
was reconciling the versions of the bill passed by those two chambers.  The
sponsor of the provision was Sen. Phil Gramm (R-TX), and it was his attempt
to discourage community groups from using the Community Reinvestment Act as
a vehicle for extortion, an allegation that he made repeatedly but never
provided any evidence to support.

This language section of the law is very problematic.  It contains internal
contradictions, raises serious First Amendment issues, and generally shows a
lack of understanding of the way CRA really works.  It took the regulators a
long time to draft these proposed rules, which was, at least in part, a
reflection of how big a problem the legislative language posed.
Nonetheless, from a community perspective, it was very important that the
regulators adhere to some key principles:


1. Everyone must be easily able to figure out whether or not they are
2. The net must be cast broadly, in order not to create a disincentive for
community groups to make their views about bank performance known, or a
disincentive for banks to partner with community groups who are willing to
speak up.
3. The reporting burden must be minimal, and should not require the creation
of any new documents or any new ways of tracking expenditures.


Here are the highlights of the proposed regulation.  Some of the key issues
they raise are identified in italics.  Note that none of these provisions
apply to federal, state and local governments, Indian tribes or tribal
organizations, or their agencies or departments.  Nor do they apply to
federally chartered public corporations that receive specific federal


What's disclosed: Complete copies of all CRA agreements entered into after

Disclosure to regulators: Banks and their affiliates are required to provide
copies of CRA agreements to their regulators within 30 days of entering into
an agreement.  Non-bank parties must provide copies to regulators, upon
request, within 30 days.

Disclosure to public: Both banks and others must make complete copies of
agreements available to the public, upon request.  No timeframe is

Length of obligation: The obligation to make copies of agreements public
ends 12 months after the end of the agreement.

Covering costs: Parties to agreements may charge anyone who requests a copy
a reasonable fee not to exceed the cost of copying and mailing.

Confidential/proprietary information: If there are provisions in an
agreement that the parties view as confidential or proprietary, they may ask
the banking regulators for permission not to disclose those provisions.  The
regulators will follow Freedom of Information Act guidelines and the
language of the Gramm-Leach-Bliley law to determine what information may be
withheld.  They expect that very little will qualify.  This is one example
of the contradictory language in the statute.  On the one hand, it states
explicitly that agreements must be disclosed in their entirety.  On the
other hand, it directs the regulators to protect proprietary and
confidential information.  The regulators seem to be emphasizing disclosure.
Groups should take a careful look at their agreements with this in mind, and
flag potential problems in their comments.


The regulators have made a real attempt to minimize the reporting burden for
community groups, as well as for banks.  For community groups, the key is
that existing reports or documents may be used to satisfy the requirements
in most cases.  In other cases, the information required is fairly minimal.
Parties to an agreement who don't receive funds under the agreement will not
have to report.

Banks will report: aggregate information on payments, fees and loans made or
received under any agreements, including their terms and conditions, and
also the aggregate number and dollar amount of loans and investments and
aggregate amount of services provided under the agreement to anyone who was
not a party to the agreement.

Other parties will report information on how funds they received under the
agreements were spent.  If the funds were for general purposes, they may use
a tax return, annual report, financial statement or other existing report to
satisfy this requirement, as long as it itemizes the amounts spent on
compensation of officers, directors and employees, administrative expenses,
travel, entertainment, consulting and professional fees, and other expenses.
They will not have to track separately funds received under the agreement,
although they will have to disclose the amount of such funds received.

If non-bank parties received funds for a specific purpose, they must report
how much they received and describe the specific purpose.

Consolidated reports:  Anyone (bank or other person) that is party to five
or more agreements will be able to file consolidated reports covering all of
their agreements. The statute gave the regulators the discretion to allow
consolidated reporting for non-bank parties to "a large number" of CRA
agreements.  They are proposing to define "a large number" as five or more,
and extend this provision to banks, as well.  This creates a situation where
groups that have two, three or four agreements will be subject to more
complicated reporting than those with five or more.  Groups may want to
recommend that this number be set at a lower level.

Timing:  Reports must be filed annually for each fiscal year covered by an
agreement.  They must be filed within six months of the end of the fiscal
year.   Non-bank parties may either file directly with the appropriate
regulators, or forward their reports to their bank partners within five
months of the end of their fiscal year, along with written instructions for
the bank to forward it to the appropriate agency.


This is the most complicated part of the regulations.  The statute set out a
detailed set of criteria for determining what constitutes an agreement,
which the regulators have incorporated in the proposed rule and elaborated
on a bit.

A CRA agreement must:
1. Be in writing.
2. Involve loans of $50,000 or more or grants of $10,000 or more in a given
3. Include among the parties an insured depository institution or its
affiliate and a non-governmental entity or person.
4. Be made pursuant to, in connection with or in fulfillment of CRA, which
means any of the factors that the regulators consider as part of a bank's
CRA exam or in evaluating applications from banks for deposit facilities.
"Fulfillment" also includes providing or refraining from providing written
or oral comments on a bank's past or future CRA performance to its

1. Individual mortgage loans.
2. Other types of loans that are made at market rates and where the funds
will not be re-loaned.
3. Cases where there has been no "CRA contact."

The concept of a "CRA contact" is another very tricky part of the proposed
reg.  As proposed, it could take one of two forms, contact with the
regulators or contact with a bank or its affiliate.

CRA contact with the regulators: includes written or oral comments on the
past or future CRA performance of a bank or its affiliate, unless the
comments were the result of a direct request from the agency.

CRA contact with a bank occurs when a person contacts an institution about:

1. providing or withholding written or oral comments on it past or future
CRA performance to a
2. providing or withholding such comments from its CRA public file,
3. its CRA rating or record of performance,
4. actions it should take to improve its performance, or
5. any obligation it has to meet the banking needs of its community, and
this discussion occurs while an application for a deposit facility is
pending or a CRA exam is going on.

The agencies say they have tried to avoid basing the determination of
whether a contact is a CRA contact on whether or not the words "Community
Reinvestment Act" are spoken, relying instead on the substance and context
of the discussion or contact.  Groups should take a critical look at the
wording of the regulation and the examples provided to see whether the
regulators have achieved this goal.

Timing of a CRA contact: This is an unresolved issue.  The regulators are
asking for feedback on whether there should be some specific timeframe
within which a CRA contact occurs and an agreement is reached in order for
the agreement to be covered by these rules.  This is another issue that
groups should take a close look at.  If the timeframe for tying together a
CRA contact and a CRA agreement is too limited, it may encourage some banks
or some groups to game the system.  For example, if a contact is only
considered a CRA contact if it occurs while an application is pending, it
may force a lot of activity into the weeks or months between the time a
merger is announced and the formal filing of the application.


Enforcement of CRA agreements: The proposed regs reiterate the language in
Gramm-Leach-Bliley that the agencies do not have authority to enforce CRA

For banks: The "Sunshine" provision is an amendment to the Federal Deposit
Insurance Act, which makes a violation of these regs subject to all of the
penalties available to the regulators under that Act, including cease and
desist orders and civil money penalties.

For non-bank parties: If the regulators determine that a non-bank party to
an agreement has willfully failed to comply in a material way, they will
give that party notice and 90 days to come into compliance.  If the party
still fails to comply, the agreement may be rendered unenforceable, and the
bank may ask the regulators to help find someone else to take over.

Diversion of funds: Since the agencies cannot enforce CRA agreements, they
cannot make a finding about whether any party to an agreement has diverted
funds for personal gain contrary to the purposes of the agreement.  However,
if a court makes such a finding, the agencies may require that person to
return the funds and/or may bar the person from entering into further
agreements for up to ten years. These are the penalties provided in the

ACTION NEEDED: First, Groups should take a close look at the regulations
(copies are available on the websites of the Federal Reserve Board
(www.bog.frb.us.gov), OTS (www.ots.treas.gov), and OCC (www.occ.treas.gov))
and begin to understand them.  Second, groups should consult with their bank
partners to gauge the practical impact the rules will have on CRA activity
at the local level.  We are interested in your feedback about problems you
identify.  Third, groups should plan to file comments on the proposed rules.
This is the time to raise questions about ambiguity in the language or other
issues that may be problematic.  Comments are due July 21, 2000.

FOR MORE INFORMATION CONTACT: Debby Goldberg at CCC's Neighborhood
Revitalization Project at (202)342-0567 or by e-mail at


BACKGROUND: As mentioned earlier (see Alert #189), the amount allocated for
defense appropriations has increased at the expense of social program
funding during the 106th Congress.  The defense budget allocation was $4
billion more than the President's request, and $22.4 billion more than last
year, slashing social programs and discretionary funds. Several amendments
were proposed during the defense appropriations process in the House to
limit overall defense spending, and to particularly to cut the nuclear
arsenal to START II levels (introduced by Reps. Allen and McGovern).
Unfortunately these amendments failed to pass the House (see below for
results), but a similar initiative has been proposed in the Senate.

Senator Kerrey (D-NE) plans to offer an amendment to this year's FY 2001
Defense Authorization Bill that would allow the Administration to reduce
(and take de-alerting measures) to the U.S. strategic nuclear arsenal to
below current START I levels (approx. 6000). The US currently spends $28
billion on nuclear weapon systems even though our nuclear arsenal system now
is comparable to 80,000 Hiroshima bombs.  This amendment would reduce the
arsenal and free up


To find out how your member voted, look at vote # by visiting

*Frank Amendment to cut defense budget by 1% - Vote #194
Vote: 88 Ayes 331 Noes 15 Not Voting

*Luther Amendment to cut Trident D-5 missile - Vote #196
Vote: 112 Ayes 313 Noes 9 Not Voting

*Moakley Amendment to Close School of the Americas - Vote #204
Vote 204 Ayes 214 Noes 16 Not Voting

ACTION NEEDED:  Call your Senators this week and ask them to SUPPORT SENATOR
KERREY'S AMENDMENT to the Defense Authorization Bill, which is scheduled to
be considered the week of June 5th. Capitol Switchboard number 202-244-3121;
or http://www.senate.gov/

1. Call your Senator and ask him/her to
* support Senator Kerrey's amendment to the Department of Defense
Authorization Bill;

2. Call your Representative at (202) 224-3121 to ask him/her to:
* support amendments to the House Department of Defense Appropriations Bill
that reduce excessive military spending and end funding for unnecessary Cold
War weapon systems;

FOR MORE INFORMATION CONTACT: the National Priorities Project at
www.natprior.org or 413-584-9556, or Melanie Bush at CCC, 202-339-9344,

H. C. {Sonny} Covington
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